Newsletters
The Central Bank of the Republic of Türkiye (CBRT) has officially withdrawn two key regulations supporting foreign exchange-protected deposit accounts, following the maturity of the last remaining accounts.
According to two notices published in the Official Gazette, the move repeals regulations that governed the conversion of both Turkish lira and gold deposit accounts into foreign exchange-protected savings products, commonly known as "KKM" accounts.
The move formalizes the CBRT’s earlier announcement to phase out the scheme in August 2025, stating that no new deposits would be allowed and existing ones would not be eligible for renewal after maturity.
Introduced in late 2021 to counter dollarization amid a sharp depreciation in the Turkish lira, the FX-protected scheme guaranteed savers compensation for currency losses relative to lira deposit interest. While it helped temporarily stabilize the exchange rate, the program also heightened the country’s sensitivity to external shocks and was widely criticized for its fiscal burden.
After reaching a record level of ₺3.4 trillion ($127.57 billion) at its peak in August 2023, the scheme is estimated by economists to have cost the Treasury over $60 billion since its inception.
Although the KKM scheme has been phased out, the gold-linked savings instruments, specifically, the conversion from gold accounts to Turkish lira deposits, will continue only as long as their existing maturities remain in effect.
In a separate move to reinforce financial stability and improve monetary transmission, the CBRT raised reserve requirement ratios on offshore Turkish lira loans to curb the growth of swap volumes and carry trade inflows.
The new measures apply to lira-denominated external borrowings with maturities of up to one year, which have been increased by 2 percentage points. As a result, the reserve ratio now stands at 20% for borrowings with maturities of up to one month, 16% for those up to three months, and 14% for those up to one year.
The same 14% rate will also apply to short-term deposits and participation funds held by foreign banks, as well as liabilities owed to foreign headquarters by branches of international banks operating in Türkiye, a step aimed at discouraging volatile short-term inflows and reinforcing monetary tightening.
Carry trade volume in Türkiye reached $59.77 billion as of the week ending Jan. 16, official data showed. Required reserves in the banking sector stood at ₺3.81 trillion ($87.92 billion) on the same date.
Set as preferred source
Set as preferred source
1 min read
1 min read
